It may not be the tech-wreck of almost two decades ago when the Nasdaq shed 80 per cent of its value between March 2000 and September 2002, but there is a distinct hissing associated with a deflating bubble.

The Financial Times’ John Authers described the overnight performance of big digital companies as “the worst one-day loss by the group in history” and he had a point.

Nvidia has been the best performing chip-maker on the S&P 500 over the past year but tumbled after announcing the suspension of self-driving tests in the wake of the recent Uber autonomous vehicle fatality and worries about Tesla’s production schedule.

“Investors are clearly worried that we may be about to see a regime change in regulation,” Luca Paolini, chief investment officer at the London-based Pictet Asset Management, told the Financial Times.

“History tells us that when a company or sector becomes dominant, it tends to attract the attention of either the regulator [US] or the taxman [Europe].

“And today the value of many tech names is based almost entirely on intangibles like reputation and brand, so regulation can have a huge impact.”

Hedge funds getting edgy

Goldman Sachs has voiced concerns for some time about the market’s heavy reliance on the FANG+ brigade, pointing out in June last year they not only represented 13 per cent of the S&P 500, but more than 40 per cent of the market’s growth.

The big investment bank more recently pointed out FANG stocks were the most “crowded trade” on Wall Street, with Amazon, Facebook and Google three of the top four most widely held shares in hedge fund portfolios .

That is terrific when they keep going up, but potentially very nasty on the way down given the “shoot first, ask questions later” reputation of the hedge funds.

In recent days Facebook’s 600 per cent five-year gain has been pulled back to a more modest 480 per cent. The others have followed, but not down such a vertiginous path.

The Icarus Trade

Across the street from Goldman Sachs, Bank of America Merrill Lynch’s Michael Hartnett famously described the one-way bet on tech stocks as the “Icarus Trade” in 2015.

Mr Hartnett is not backing away from the statement.

“The lowest interest rates in 5,000 years have guaranteed a melt-up trade in risk assets,” he recently wrote.

Mr Hartnett pointed out that the FANG group, plus eBay and Twitter, had seen their collective value increase by more than 600 per cent since the GFC, making it the third largest asset bubble in the past 40 years.

“Assuming [there is] no major drop in the six constituent stocks — the e-commerce bubble is set to become the ‘largest bubble of all time’ over the next few months,” he said.

That lofty title is now a bit further out of reach.

If the hissing becomes a pop, the FANG+ group may be consigned to history as just another ordinary, every-other-decade bubble.

The question is though, just how many billions more will be shed along the way.

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